Non-Submission of crucial Evidence on Unexplained Cash Credits due to COVID-19 disruptions: ITAT accepts delayed Evidence, remands matter [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) accepted new evidence submitted by the assessee regarding unexplained cash credit, acknowledging the delays caused by the COVID-19 pandemic. The tribunal remanded the matter to the Assessing Officer (AO) for further investigation and verification of this newly submitted evidence.

Narottamprasad Surajdin Pandey, the assessee is a businessman from Gujarat who filed his income tax return for the assessment year 2017-18. During the scrutiny, the assessing officer raised concerns regarding the unsecured loan totaling Rs. 7,28,923, sundry creditors amounting to Rs. 2,82,355, and labor wages claimed as an expense totaling Rs. 9,81,256 in his financial records.

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The AO issued a show-cause notice but the assessee only partially responded with evidence as some supporting documents were still being gathered. Despite this, the AO passed an assessment order under Section 143(3) of the Income Tax Act, making additions to the assessee’s total income under Section 68 of the Income Tax Act, 1961.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision and issued an ex-parte order. Then, the assessee challenged the CIT(A) order before the Surat Bench of ITAT.

The assessee’s counsel argued that AO did not give the assessee sufficient opportunity to submit all necessary documents. Some documents had been submitted, but the AO ignored them. The assessee submitted new evidence such as a summary of unsecured loans, audited financial statements, and Form 26AS before the tribunal.

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The assessee's counsel submitted that the assessee had experienced delays in submitting the evidence, partly due to the COVID-19 pandemic, which affected his ability to comply with notices from the CIT(A).

On the contrary, the revenue counsel argued that the assessee had failed to provide the necessary documents at the assessment stage to substantiate the unsecured loans, sundry creditors, and labor wages. Given that no evidence was presented before the CIT(A), there was no ground for allowing relief to the assessee.

The Judicial Member, Pawan Singh observed that the assessee had indeed submitted partial evidence, but the AO had not considered it during the assessment process. The tribunal considered the assessee’s reasoning for the delay was valid.

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The tribunal decided that the evidence filed by the assessee, including details of unsecured loans, sundry creditors, and labor wages, was crucial and should be reviewed to ensure a fair assessment.

Therefore, the tribunal remanded the matter back to AO directing to verify the additional evidence and pass a fresh assessment order. The assessee’s appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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